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Difference between Long-Term and Short-Term Equity Investments

There are several risks that are involved with investments which is why the stock market has a 50:50 success rate. It is for this reason, that short-term equity investments are considered as risky, whereas long-term investments are considered much more profitable and consistent in terms of returns.

 

Long-term Investments

If you are looking to save up for the long-term i.e. more than a year, then investing in the stock market is a good option. Stocks can offer you attractive returns in long-term if you invest in high-growth and multi-bagger shares after evaluation of risk. Long-term investment in large cap shares can yield consistent returns for decades. Other lucrative options for long-term investment include mutual funds and bonds – government and corporate, which would yield moderate but steady returns. Long-term equity investments can be highly profitable if the market potential and performance of the company is analysed diligently before investing.  Additionally, according to Section10(38) (*http://www.incometaxindia.gov.in/_layouts/15/dit/Pages/viewer.aspxgrp=Act&cname=CMSID&cval=102120000000064453&searchFilter=%5b%7b%22CrawledPropertyKey%22:1,%22Value%22:%22Act%22,%22SearchOperand%22:2%7d,%7b%22CrawledPropertyKey%22:0,%22Value%22:%22Incometax%20Act,%201961%22,%22SearchOperand%22:2%7d,%7b%22CrawledPropertyKey%22:29,%22Value%22:%222017%22,%22SearchOperand%22:2%7d%5d&k=&IsDlg=0) of the Income Tax Act, you can get a tax exemption on capital gains derived from equities that are held for at least one year. 

Short-term Investments

Short-term investments are a good option when you are looking to save your money for a shorter period viz. 1 year or lesser. Some of the best options in terms of short term investments include Mid cap shares and money-market mutual funds that fetch higher returns in a shorter period. When you are investing in equities for short-term capital gains, one of the drawbacks is that there is a lot of unpredictability and the risks are much higher. Moreover, it is difficult to judge a company’s performance and stock market momentum in the short-term. For short-term capital gains in equities involving Intra-day trades, BTST trades or equities trading by holding it for less than a year, you need to pay a tax of 15% on the capital gains that you have earned in the investment period, according to Section111A

(http://www.incometaxindia.gov.in/_layouts/15/dit/Pages/viewer.aspxgrp=Act&cname=CMSID&cval=102120000000064454&searchFilter=%5b%7b%22CrawledPropertyKey%22:1,%22Value%22:%22Act%22,%22SearchOperand%22:2%7d,%7b%22CrawledPropertyKey%22:0,%22Value%22:%22Incometax%20Act,%201961%22,%22SearchOperand%22:2%7d,%7b%22CrawledPropertyKey%22:29,%22Value%22:%222017%22,%22SearchOperand%22:2%7d%5d&k=&IsDlg=0) of the Income Tax Act.

 

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